Hershey dinner in question

Corbett feted as he probed the charity.

By Bob Fernandez, Inquirer Staff Writer

Posted: February 24, 2011

Tom Corbett was mere hours away from becoming the 46th governor of Pennsylvania, but he was still state attorney general when he arrived at a celebration dinner in Hershey for donors to his inaugural gala - scheduled for the next day in the state capital.

Though Corbett's inauguration would be exhaustively covered by the media, the "Benefactors Dinner" was a subdued affair held Jan. 17 at the Hotel Hershey, which had received a lavish, $70 million refurbishment in 2009.

In attendance were political strategists, Corbett fund-raiser Bob Asher, officials from companies drilling in the Marcellus Shale - basically people who contributed between $5,000 and $50,000 to fund the inaugural festivities.

Elegant and exclusive, the Hotel Hershey is owned by the sprawling Hershey charitable enterprise that includes the chocolate company and the Milton S. Hershey School for impoverished children and is headed by LeRoy S. Zimmerman, a powerful Republican elder statesman and a two-time Pennsylvania attorney general himself.

Zimmerman and Corbett have been personal friends and political allies for many years, and the Hotel Hershey - dubbed "Zimm's Palace" for its luxury - would seem like the logical place for the dinner, except for one thing:

Zimmerman, 76, and the Hershey charity were the targets of an investigation announced months before by Corbett for possibly wasting millions of dollars meant to finance the Hershey School.

The Attorney General's Office confirmed the noncriminal investigation in October while Corbett was campaigning for governor and after a series of articles in The Inquirer about questionable expenditures, one of them the 2006 purchase of the Wren Dale golf course for $12 million with school funds.

The Benefactors Dinner would seem to be the latest example of the close ties between the Zimmerman-led charity and state Republicans, and it calls into question how effectively the Attorney General's Office can investigate financial decisions made by Hershey's leaders.

At the time of the dinner, Zimmerman sat on all three Hershey boards of directors, which included chairing the main trust board that directly funds the Hershey School and chairing the charity's for-profit subsidiary that owns and operates the Hotel Hershey.

The Hershey board hierarchy itself is heavy with other highly notable state Republicans, such as former Gov. Tom Ridge and Hall of Fame football player Lynn Swann.

Kevin Harley, a spokesman for Corbett, said Wednesday that Corbett's "inaugural committee paid whatever the sticker price was at the hotel, and nothing was comped. . . . I'm sure it was a nice dinner. They were treated like any other party that would make use of the facility." Harley declined to say how much the Corbett committee paid the Hotel Hershey.

Corbett didn't consider the dinner a "conflict of interest," Harley said, because Hershey Entertainment, which owns and operates the Hotel Hershey, was not part of the attorney general's review of the golf course deal.

Though it doesn't own the golf course, Hershey Entertainment operates Wren Dale under contract by the Hershey School, and the golf course is available to guests of the Hotel Hershey.

Previously, a spokesman for the Attorney General's Office, Nils Frederiksen, said Corbett's relationships outside the state agency would not have an impact on the Hershey investigation.

One long-term observer of the Attorney General's Office said the dinner seemed to raise issues. "Given the fact that there was an investigation, were there arms-length negotiations?" asked Mark D. Schwartz, a Bryn Mawr lawyer who has been critical of the attorney general's oversight of charities and who filed a proceeding to reopen the Barnes art case in 2007.

Schwartz said the dinner seemed to be symptomatic of Harrisburg, where "political and personal friendships tend to overshadow official responsibilities" - in this case, the attorney general's role as regulator of state charities.

The inauguration-eve dinner for Corbett was not a lone example of Zimmerman and Hershey properties hosting a swank GOP affair.

A court petition, filed earlier this month in Dauphin County Orphans' Court, claims that Zimmerman hosted a Republican fund-raiser at the Hershey charity's headquarters in 2007 and had the event catered free by Hershey Entertainment.

Corbett's deputy, William Ryan, is now the acting attorney general. Corbett has named an official in the U.S. Attorney's Office in Pittsburgh, Linda L. Kelly, to fill out the remaining two years of his term as attorney general. Kelly's nomination requires confirmation by the Pennsylvania Senate.

The questions surrounding the Hershey charity and how its money was spent seem to be widening.

The court petition by former Hershey Trust Co. president Robert Reese claimed widespread self-dealing by Zimmerman and other Hershey trustees.

Connie McNamara, spokeswoman for the Hershey Trust Co., which manages the charity's assets, said she could not comment because of pending litigation.

Reese, a scion of the peanut-butter-cup fortune, was voted off the charity's main board one day after he filed the petition that described free golf outings, spa treatments, limousine rides, and overnight stays at the Hotel Hershey for the trustees.

Reese stated in the court document that bad decisions in the last several years led to the waste of $22 million of the charity's assets that Hershey trustees should reimburse.

In addition to filing the document in Dauphin County Orphans' Court, Reese was required to notify the Internal Revenue Service of the petition, according to the petition document. He would not comment Wednesday because of the litigation.

One of the wealthiest philanthropies in Pennsylvania, the Hershey charity manages the estate of Milton and Catherine Hershey. Precise directives were left as to how their fortune would be managed on behalf of the Hershey School. Reports in The Inquirer detailed expenditures that would seem not to meet some of those directives.

The trust now has assets of more than $7 billion, and the school in Derry Township enrolls 1,800 children, a number that critics say is far too low for the value of the assets of the charity.

The trust is structured so that three for-profit companies - the Hershey chocolate company, Hershey Entertainment, and the Hershey Trust Co. - finance the Hershey School with cash dividends. Only the candy company has paid regular dividends to operate the school in recent years.

On Monday, the Hershey charity said it would sell the private-wealth group in the Hershey Trust Co. to the Bryn Mawr Bank Corp. "The Hershey Trust Co. has been taking ongoing steps to return its full focus to its core mission of managing the assets of the Milton Hershey School Trust," Zimmerman said Monday in a prepared statement.

Zimmerman was appointed to the charity in late 2002 with the strong support of the Pennsylvania Office of Attorney General, which has been held by Republicans since Zimmerman was the first elected attorney general, in 1980.

Zimmerman was paid $500,000 in Hershey-related director fees in 2009, according to IRS records, or about $9,600 a week. Zimmerman said this month he would not seek reelection to the Hershey chocolate company board, a position that pays about $200,000 a year.

Reese's petition also described a June 2007 VIP reception for Republican donors that was hosted by Zimmerman at the charity's headquarters, the High Point Mansion in Hershey. The mansion was the home of Milton and Catherine Hershey.

Karl Rove was the guest of honor, and Hershey Entertainment & Resort catered the event free, according to the Reese petition.

Later in the evening, the VIPs and others had after-hours access to Hersheypark, also owned by the charity, as part of a night of political discussion and festivities.

And when the political gathering was over, the Republican State Committee of Pennsylvania billed Zimmerman $15,000, according to a copy of the invoice.

The invoice was sent to the Hershey Trust Co., which manages the assets of the school, on Republican State Committee letterhead and stated: "Per LeRoy Zimmerman's request, please find an invoice for the fund-raiser hosted by LeRoy Zimmerman on behalf of the Republican State Committee of Pennsylvania on June 29, 2007, at the High Point Mansion."

That August, the $15,000 was paid through Hershey Entertainment's political-action committee, according to state campaign-finance records.

Garrett Galia, a spokesman for Hershey Entertainment, said: "Regarding the political action committee payment, while our political action committee contributions are a matter of public record, we do not comment on individual contributions."

A spokeswoman for the Republican State Committee of Pennsylvania did not return phone calls last week to describe what the $15,000 was meant to cover. A description on the state's campaign-finance website says the expenditure by the PAC was for "Sponsor - VIP reception."

McNamara said in an e-mail Wednesday that "no trust money had been spent" on the 2007 Republican fund-raiser.

For previous reporting on the Hershey Trust, go to go.philly.com/hershey